Inefficient Markets: An Introduction to Behavioral Finance

Inefficient Markets: An Introduction to Behavioral Finance

by Andrei Shleifer
     
 

ISBN-10: 0198292287

ISBN-13: 9780198292289

Pub. Date: 04/20/2000

Publisher: Oxford University Press

The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets:

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Overview

The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents models of such markets. These models explain the available financial data more accurately than the efficient markets hypothesis, and generate new predictions about security prices. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.

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Product Details

ISBN-13:
9780198292289
Publisher:
Oxford University Press
Publication date:
04/20/2000
Series:
Clarendon Lectures in Economics
Pages:
224
Product dimensions:
5.70(w) x 8.60(h) x 0.90(d)

Table of Contents

Are Financial Markets Efficient?
Noise Trader Risk in Financial Markets
The Closed-End Fund Puzzle
Professional Arbitrage
A Model of Investor Sentiment
Positive Feedback Investment Strategies
Open Problems

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